FINANCIAL BUILDING CORPORATION, petitioner, vs. FORBES PARK ASSOCIATION, INC.

,
respondent.
G.R. No. 133119, August 17, 2000, DE LEON, JR., J.
If the dismissal of the main action results in the dismissal of the counterclaim already filed, it stands to
reason that the filing of a motion to dismiss the complaint is an implied waiver of the compulsory
counterclaim because the grant of the motion ultimately results in the dismissal of the counterclaim.
Thus, the filing of a motion to dismiss and the setting up of a compulsory counterclaim are
incompatible remedies. In the event that a defending party has a ground for dismissal and a
compulsory counterclaim at the same time, he must choose only one remedy. If he decides to file a
motion to dismiss, he will lose his compulsory counterclaim. But if he opts to set up his compulsory
counterclaim, he may still plead his ground for dismissal as an affirmative defense in his answer.
FACTS:
The then Union of Soviet Socialist Republic (USSR), owner of a residential lot located at Forbes
Park Village, Makati City, engaged the services of petitioner Financial Building Corporation
(Financial Building) for the construction of a multi-level office and staff apartment building at the
said lot. Due to USSR’s representation that it would be building a residence for its Trade
Representative, Forbes Park Association, Inc. (Forbes Park) authorized the construction. USSR even
gave assurance that it has been complying all regulations of Forbes Park including the construction
of a single-family residential building in each lot. Despite this, Financial Building submitted to
Makati City a second building plan for the construction of a multi-level apartment building, which
was different from the first plan submitted to Forbes Park.
Forbes Park discovered the second plan and confirmed USSR’s violation. Thus, it enjoined further
construction work suspending all permits of entry for the personnel and materials of Financial
Building. Financial Building filed a Complaint for Injunction and Damages with a prayer for
Preliminary Injunction against Forbes Park docketed as Civil Case No. 16540. Forbes Park filed a
Motion to Dismiss on the ground that Forbes Park has no cause of action because it was not the real
party-in-interest.
RTC issued a writ of preliminary injunction against Forbes Park but the CA nullified it and
dismissed the complaint altogether. SC affirmed the dismissal and rendered a decision in G.R. No.
79319 dated April 6, 1988.
Forbes Park then sought to vindicate its rights by filing a Complaint for Damages against Financial
Building arising from the violation of its rules and regulations. RTC ruled in favor of Forbes Park.
CA affirmed.
ISSUE:
Whether the case is barred due to Forbes Park’s failure to set it up as a compulsory counterclaim in
the prior injunction suit (Civil Case No. 16540) initiated by Financial Building
RULING: Yes
A compulsory counterclaim is one which arises out of or is necessarily connected with the
transaction or occurrence that is the subject matter of the opposing party's claim. If it is within the
jurisdiction of the court and it does not require for its adjudication the presence of third parties
over whom the court cannot acquire jurisdiction, such compulsory counterclaim is barred if it is not
set up in the action led by the opposing party. Thus, a compulsory counterclaim cannot be the
subject of a separate action but it should instead be asserted in the same suit involving the same
transaction or occurrence, which gave rise to it.
To determine whether a counterclaim is compulsory or not, we have devised the following tests: (1)
Are the issues of fact or law raised by the claim and the counterclaim largely the same? (2) Would
res judicata bar a subsequent suit on defendant's claim absent the compulsory counterclaim rule?
(3) Will substantially the same evidence support or refute plaintiff's claim as well as the
defendant's counterclaim? and (4) Is there any logical relation between the claim and the
counterclaim? Affirmative answers to the above queries indicate the existence of a compulsory
counterclaim.
Undoubtedly, the prior injunction suit and the instant case arose from the same occurrence – the
construction work done by Financial Building on the USSR's lot in Forbes Park Village. The issues of
fact and law in both cases are identical. The logical relation between the two cases is patent and it is
obvious that substantially the same evidence is involved in the said cases. The two cases involve the
same parties. The aggregate amount of the claims in the instant case is within the jurisdiction of the
regional trial court, had it been set up as a counterclaim in Civil Case No. 16540. Therefore, Forbes
Park's claims in the instant case should have been filed as a counterclaim in Civil Case No. 16540.
Moreover, since Forbes Park filed a motion to dismiss in Civil Case No. 16540, its existing
compulsory counterclaim at that time is now barred. If the dismissal of the main action results in
the dismissal of the counterclaim already filed, it stands to reason that the filing of a motion to
dismiss the complaint is an implied waiver of the compulsory counterclaim because the grant of the
motion ultimately results in the dismissal of the counterclaim.
Thus, the filing of a motion to dismiss and the setting up of a compulsory counterclaim are
incompatible remedies. In the event that a defending party has a ground for dismissal and a
compulsory counterclaim at the same time, he must choose only one remedy. If he decides to file a
motion to dismiss, he will lose his compulsory counterclaim. But if he opts to set up his
compulsory counterclaim, he may still plead his ground for dismissal as an affirmative
defense in his answer. The latter option is obviously more favorable to the defendant although
such fact was lost on Forbes Park.
The ground for dismissal invoked by Forbes Park in Civil Case No. 16540 was lack of cause of
action. There was no need to plead such ground in a motion to dismiss or in the answer since the
same was not deemed waived if it was not pleaded. Nonetheless, Forbes Park still filed a motion to
dismiss and thus exercised bad judgment in its choice of remedies.
Inasmuch as the action for damages led by Forbes Park should be as it is hereby dismissed for being
barred by the prior judgment in G.R. No. 79319 (supra) and/or deemed waived by Forbes Park to
interpose the same under the rule on compulsory counterclaims.